EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Chapter 33, Problem 2FCT
To determine
Reason for
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Suppose we discover that the Canadian dollar suddenly depreciates against the Euro. What could be responsible for this: Prices of
goods and services in Europe rise more than prices in Canada OR Canadian tourist destinations become more attractive than
those in Europe OR Interest rates in Europe rise more than interest rates in Canada?
Choose one and explain.
What is the current (within the last 48 hours) exchange rate between the U.S. dollar and the Chinese Yuan?
Over the past 20 years , Mexico has had high inflation and Japan has had low inflation.What do you predict has happened to the number of Mexican pesos a person can buy with a Japanese yen?
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- In mid-2006, a British pound sterling (the monetary unit in the United Kingdom) was worth 1.4 euros (the monetary unit in the European Union). If a U.S. dollar bought 0.55 pound sterling in 2006, what was the exchange rate between the U.S. dollar and the euro?arrow_forwardWhat happens to the exchange rate of a country’s currency when that country experiences high levels of inflation for an extended period of time? How will it affect the flow of that country’s currency in and out of the country? Explain your answers.arrow_forwardSuppose that, initially, the foreign exchange market between the United Kingdom and Canada is in equilibrium. However, over time, the supply of the Canadian euro shifts to the left, causing the pound to (depreciate/appreciate) against the Canadian euro. Which of the following is a disadvantage of this change in the supply of foreign currency for the United Kingdom? a)UK exporting firms find it easier to sell goods on Canadian markets. b)UK consumers face lower prices on Canadian goods. c)UK exporting firms find it more difficult to compete in the Canadian market. d)UK consumers face higher prices on Canadian goods.arrow_forward
- why, according to some economists, should canada adopt the U.S dollar as its currency?arrow_forwardPlease label your answers to the following questions clearly. (a) Outline two factors that affect the demand for a currency and two factors that affect its supply. (b) Imagine that the diagram below respresents the market for the Australian Dollar. Refer to this diagram in explaining what would happen to the value of the Australian Dollar if Australia suddenly experienced an increase in its inflation rate relative to that of its trading partners. ER SAUD ER, DAUD Quantity of AUDarrow_forwardWhat effect would an appreciation of the U.S. dollar, relative to the Chinese Yuan, have on both the quantity of our exports to China and the quantity of our imports from China.arrow_forward
- Will an increase in attractiveness of the US as a tourist destination DECREASE or INCREASE the value of US dollar?arrow_forwardMultinationals generally have production plants in a number of countries. Consequently, they can move production from expensive locations to cheaper ones in response to various economic developments– a phenomenon called outsourcing when a domestically based firm moves part of its production abroad. If the dollar depreciates, what would you expect to happen to outsourcing by American companies? Explain and provide an example.arrow_forwardTo keep the U.S. dollar from depreciating against the Japanese yen, the U.S. Federal Reserve must Buy Yen and sell U.S. dollars. Buy both Yen and U.S. dollars. Sell Yen and buy U.S. dollars. Sell both Yen and U.S. dollars.arrow_forward
- Other things being equal, an increase in a country's interest rates will cause its currency to depreciate. True False If the U.S. dollar had a value equal to 1 euro a year ago and is now worth 1.2 euros, we say that the euro has appreciated over the past year. True Falsearrow_forwardThe Chinese yuan/RMB is not a widely used currency for trade or investment purposes. Why is this? What will the Chinese government need to do to make the RMB more widely used? Why does it not take these actions?arrow_forwardWhen a country's currency appreciates, is this generally good news or bad news for a country's consumers? Is it generally good or bad news for the country's businesses? Explain your reasoning - try to use examples.arrow_forward
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